Low Down Payment makes sense for most first time home buyers who are struggling to come up with 20% of the home purchase.
A large percentage of the world’s population dreams of one day owning a home of their own. However, many believe that they will never have the financial ability to be able to do so. A traditional mortgage may require you to pay as much as 20 percent upfront as a down payment, as well as having to pay for your closing costs. It makes sense then that lots of people don’t think they will ever be able to save up that kind of money.
Luckily, there are programs and financial products available for individuals who would like to purchase a home with little or no money down. They are quite common and used more often than you might think. Some studies estimate that as many as 80 percent of first-time homeowners put down less than 20 percent up front. The main mortgage products used by these buyers are:
Federal Housing Administration (FHA) Loans
Loans backed by the Federal Housing Administration are available from most major financial institutions. These mortgages are quite similar to conventional mortgages but are a little easier to qualify for. For many, the low down payment requirement is the main benefit of FHA loans. Many borrowers will qualify for down payments as low as 3.5 percent.
VA Home Loans
For former of current service members, a VA loan can be a great option. You will need to be affiliated with the military to be eligible for a VA loan, but if you can qualify you might be able to purchase a new home with as little as 0 percent down.
Though both of these loan options are great for individuals who don’t want to put a lot of money down upfront, you should expect to pay some fees or insurance payments that may not be present with a conventional mortgage.
While avoiding a high down payment is attractive to many buyers, you should also remember to consider other closing costs. You may want to speak with your lender to see if they have any programs in place to minimize your costs. Alternatively, you can negotiate with the seller of the home to see if they would be willing to cover a portion of the closing costs. Many will be willing to do so in order to finalize the deal as quickly and easily as possible.
Contact Mona Koussa, a San Francisco bay area local Broker, for more information and reliable VA and FHA local lenders list.